The $63 million redevelopment project proposed by developer TM Montante Development, which includes a $28 million senior housing development by Canterbury Woods, aims to transform the former Millard Fillmore Hospital at Gates Circle into a campus that eventually could have as many as 550 housing units, from condominiums and market-rate apartments to continual care units for elderly residents.

It’s the market rate housing that could get sticky.

Local industrial development agencies generally don’t provide subsidies to market-rate housing projects, like a suburban subdivision or an apartment complex. But the eligibility guidelines that all of the IDAs in Erie County follow do allow incentives for senior housing projects.

But senior housing has been an issue simmering in the background of economic development circles for more than a year, ever since a University at Buffalo study raised serious questions about whether tax breaks for senior housing developments make economic sense.

The study, by the Regional Institute at UB, found that fewer than 1 percent of senior citizens in the county move away because they can’t find appropriate housing, contradicting a long-held notion that a lack of housing was driving residents away. That raised the question whether there is still a need for IDAs to support new senior housing throughout Erie County.

The question has garnered the most attention in Amherst, where Amherst IDA officials pointed to the UB study as a main reason for its May decision to turn down an incentive package worth more than $1.3 million for an $8.9 million project to build 99 market-rate apartments for senior citizens on Maple Road.

A month later, the Amherst IDA imposed a six-month moratorium on tax breaks for senior housing projects, in hopes that all of the county’s IDAs would get together during that time and hammer out a common policy that takes into account the findings of the UB study.

That hasn’t happened, though, and Amherst IDA officials said late last month that they would let the moratorium expire at the end of this year, although they may adopt some temporary guidelines to cover some concerns about the impact of senior housing projects and whether they would be permitted outside designated enhancement zones.

But now, with the project at Gates Circle in Buffalo’s tony Delaware District looming, there’s more reason than ever for the county’s IDAs to tackle the senior housing question.

“It looks like we’ll have a real project to consider,” said Richard Tobe, the deputy Erie County executive who heads the policy committee that sets the eligibility guidelines followed by all six of Erie County’s IDAs. That discussion likely will begin in earnest next month.

For years, local IDAs regularly backed senior housing projects, based on the belief that those developments provided badly needed housing for seniors who otherwise might move to the Sun Belt or communities where there were more elderly-friendly housing options. As a result, local IDAs regularly provided tax breaks for all kinds of senior housing projects, from independent living centers and assisted living facilities to low-income senior apartments and even market-rate apartment complexes.

But the foundation of that policy was undermined by the UB study, which found that almost no senior citizens move out of the region because they can’t find suitable housing. If tax breaks merely help elderly residents move into taxpayer-subsidized apartments down the street, that’s not economic development. It’s a nice gift from taxpayers for a few thousand senior citizens lucky enough to live in subsidized properties.

James J. Allen, the Amherst IDA’s executive director, thinks the issue needs to be studied further, noting that developers typically say senior housing projects – while they’re in demand – aren’t economically viable without incentives. The developer of the Maple Road project in Amherst, MEL Investors, said monthly rents that would have averaged $900 to $1,000 with the tax breaks, would have jumped by as much as $200 without them. And without the tax breaks, the project has stalled.

“I think we should all together figure out how to do it,” Allen said. “We’re trying to keep this as countywide as we can.”